Assessment of the impacts of demand curtailments in the DAMs: issues in and proposed modifications of FERC Order No. 745
type: CreativeWork
description: The Federal Energy Regulatory Commission (FERC), in its initiative to incentivize demand response resources (DRRs) to participate in the day-ahead markets (DAMs), enacted Order No. 745. The Order mandated each ISO/RTO to perform a monthly cost-effectiveness test, the so-called net benefits test (NBT), that determines the monthly threshold price that serves as the economic signal for the dispatch of DRRs. The determination of the threshold price without explicit consideration of the grid and its associated constraints prompted the motivation for our investigation. Analytical considerations of the issues were accompanied by extensive numerical studies based on simulation. In our studies, we identify the two key unintended consequences emanating from the DRR participation in the DAMs. One is the existence of instances where the dispatch of DRRs increases the purchase payments of loads not participating in curtailment provision so that those buyers are worse off due to the DRR demand curtailments presence in the DAMs. The second set of unintended consequences consists of the cases where the participation of DRRs results in higher prices to their remaining loads under the FERC compensation rules. The NBT fails to test for these unintended consequences and based on our simulations studies, such events may occur frequently. In light of the results of these investigations, we propose specific modifications to the NBT. The modifications are in three principal areas – data usage, explicit consideration of transmission system in the determination of the threshold price and an additional test to guarantee that no buyer is worse off in the post-curtailment state than in the pre-curtailment state. We propose to limit the data to on-peak LMPs instead of the representative offer curve data based on data from all the hours of the month. We propose the replacement of the system-wide threshold price by node-specific threshold prices at each node to explicitly account for transmission …
abstract: The Federal Energy Regulatory Commission (FERC), in its initiative to incentivize demand response resources (DRRs) to participate in the day-ahead markets (DAMs), enacted Order No. 745. The Order mandated each ISO/RTO to perform a monthly cost-effectiveness test, the so-called net benefits test (NBT), that determines the monthly threshold price that serves as the economic signal for the dispatch of DRRs. The determination of the threshold price without explicit consideration of the grid and its associated constraints prompted the motivation for our investigation. Analytical considerations of the issues were accompanied by extensive numerical studies based on simulation. In our studies, we identify the two key unintended consequences emanating from the DRR participation in the DAMs. One is the existence of instances where the dispatch of DRRs increases the purchase payments of loads not participating in curtailment provision so that those buyers are worse off due to the DRR demand curtailments presence in the DAMs. The second set of unintended consequences consists of the cases where the participation of DRRs results in higher prices to their remaining loads under the FERC compensation rules. The NBT fails to test for these unintended consequences and based on our simulations studies, such events may occur frequently. In light of the results of these investigations, we propose specific modifications to the NBT. The modifications are in three principal areas – data usage, explicit consideration of transmission system in the determination of the threshold price and an additional test to guarantee that no buyer is worse off in the post-curtailment state than in the pre-curtailment state. We propose to limit the data to on-peak LMPs instead of the representative offer curve data based on data from all the hours of the month. We propose the replacement of the system-wide threshold price by node-specific threshold prices at each node to explicitly account for transmission …
author: Castillo, Isaac
language: en
keywords: power system economics, demand response, net benefits test
date published: 2013-02-03T19:28:15Z
date modified: 2026-07-22T22:25:33Z
provider: University of Illinois - Urbana-Champaign
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Illinois at Urbana-Champaign

PropertyValue
property ID: Handle
value: http://hdl.handle.net/2142/42218